Legislators mull proposing KPC?s contract amendment

As the East Kalimantan provincial administration has shown no sign to drop its legal suit against shareholders of East Kalimantan-based coal miner PT Kaltim Prima Coal (KPC), several legislators have considered asking the House of Representatives (DPR) to press the government to amend KPC?s contract, according to a senior commission member.

?In our discussion to day, several House members underlined the authority of the House to ask for contract amendment. We took note of their views,? Julius Bobo, vice chairman of DPR?s sub-commission in charge of mining, told Petromindo.Com on Tuesday. It is part of DPR?s Commission VIII which deals with energy and mineral resources.

Julius declined to provide details of the legislators? suggestions. He only said the legislators wanted any lawful efforts to smoothen the divestment of 51 percent of KPC shares.

He said however Commission VIII maintained its official stance that KPC shares must be divested by July 31 as agreed between the central government and KPC shareholders Rio Tinto and BP Plc. ?The commission will send a letter to the Minister of Energy and Mineral Resources to stick to the deadline,? Julius said.

On Monday, the House?s sub-commission held talks with central government and East Kalimantan officials, and KPC shareholders with an aim to push the three parties to proceed with KPC share divestment as scheduled.

In their meeting however the three parties refused to back down from their previous stance as the central government insisted that it wanted part of the 51 percent stake, the East Kalimantan administration stressed its demand for the entire 51 percent, and KPC refused to sell the shares unless East Kalimantan drops its lawsuit against Rio Tinto and BP Plc.

Rio Tinto and BP Plc equally own KPC which operates a huge coalmine in Sangatta in East Kutai Regency, East Kalimantan.

KPC and state coal mining firm PT Batubara Bukit Asam (PTBA), which represented the government, in 1982 signed a contract to mine for coal in East Kalimantan. The contract obliges KPC to divest 51 percent of its shares to Indonesian parties after 10 years commercial operation.

The firm started commercial operation in April of 1992.

Early this year, the East Kalimantan provincial administration sued Rio Tinto and BP Plc in the South Jakarta district court for US$776 million accusing them of blocking it from becoming the preferred bidder for KPC shares. As a result, the court seized 51 percent of KPC shares, making it impossible for the firm to divest its shares as required.

In another development, KPC on Monday issued a press release stating that it had reached in principle agreement with the central government on finalizing KPC share divestment.

Under the agreement, KPC will offer 51 percent of its shares to the central government at the agreed price; the central government will sell 20-25 percent of the 51 percent stake to PTBA, and 26-31 percent to East Kalimantan provincial administration / East Kutai regency.

KPC said the central government would conduct due diligence into the potential buyers. (leo)